Microsoft announces first ever drop in sales

Microsoft profits are down 32 per cent on last year

Microsoft has released its third-quarter financial results for the period ending 31 March, announcing revenues of $13.65bn (£9.34bn) - six per cent down on the same period last year.

The quarter marks the software giant's first ever drop in revenue, as the ongoing recession takes its toll on its core PC market.

Microsoft said that profit had fallen by 32 per cent to $2.98bn (£2.04bn), when compared to the previous year.

Microsoft said that its Client, Business and Server & Tools divisions had been particularly badly affected by the global drop in PC sales, but added that revenue from enterprise customers had remained stable during the quarter.

A recent Gartner report showed that worldwide PC shipments totalled 67 million units in the first quarter of 2009, nearly seven per cent down on the first quarter of 2008.

Microsoft saw client sales fall to $3.4bn (£2.3bn) from $4bn (£2.7bn) a year ago, while the Microsoft Business Division suffered a drop in revenue to $4.5bn (£3.1bn) from $4.7bn (£3.2bn) a year ago. Microsoft's online service division also saw sales shrink, from $843m (£577m) in 2008 to $721m (£493m).

In a webcast announcing the results, Microsoft's senior vice president and chief financial officer, Chris Liddell, said that emerging markets had been affected in particular, and that demand had decreased by as much as 20 per cent.

Liddell added that Microsoft continued to have some "pockets of strength", such as in netbook and Xbox sales which reflect "consumers' desire to purchase down the price point".

Liddell said that, while he was not happy with the results, he was pleased with the company's "relevant performance".

"We managed expenses significantly below our expectations going into the quarter, which is a credit to our employees' ability to adapt to a new reality, " he explained. "Despite all the distractions, including the first significant layoffs the company has ever implemented, we executed on our product development milestone."

The financial quarter was the worst Microsoft has experienced since becoming a public company in 1986.